Allow PM Modi to focus on economy

This columnist has claimed for the past three years that Narendra Damodardas Modi suffers less damage from his foes than some of his friends. Easily the worst offender is his own party, the BJP, which needs to avoid burdening Prime Minister Modi with non-stop campaigning in state election after state election, thereby taking away chunks of time and attention needed for the resolution of economic issues. In Haryana, Jharkhand, Maharashtra, and now in Bihar, the Prime Minister of India has in effect been showcased by his party as a state leader, with voters being asked to “vote for Modi” in a context where the only certainty is that he will not be the Chief Minister of that state, even should the BJP get a “Rajiv Majority” of three-fourths of the legislative seats. Had his party promised that Modi would exchange his current job with that of running the state, it is likely that the BJP would have got a crushing majority in those state polls where it failed to cross the halfway tally, but this would be a bad bargain for the country. Hence, the desirability of his party leaving the Prime Minister to do the job for which voters in India have given the BJP a majority in the Lok Sabha, which is running the Government of India, itself a whole-time job even for an individual as hard working as Narendra Modi.

The new government got on the wrong side of the perception game from the start, with its first Economic Survey in effect calling the BJP election campaign an untruth by claiming that the management of the economy by the UPA had been adequate rather than disastrous. Naturally, the people thereafter expected “Achhe Din” to dawn immediately, rather than after the two years needed to clear up the debris left behind by Manmohan Singh. Since then, the Prime Minister has served as the Air Force, carpet bombing “hostile” (to economic growth) areas with schemes such as Digital India, Make in India and Smart Cities. After that, the “tanks and artillery” (i.e. his ministerial and official team) needed to come in to take over the land cleared by the Prime Minister, so that concrete progress can get made on these innovative ideas. As yet, the efficiency and progress expected from a Team Modi (rather than a Team Manmohan or even a Team Vajpayee) is not visible. An example is the banking system, large parts of which are getting clogged through non-performing assets (NPAs). Those who have taken the loans need to have their equity confiscated and resold to other investors, using the proceeds to re-capitalise those banks whose balance sheets are shaky. Rather than gouging the taxpayer, banks need to get fresh infusions of capital through sale of the equity held by NPA promoters, as well as their own shares in a dilution of state shareholding. Going in for the same high tax system as the UPA was the conventional option. Slashing direct taxes would have created a boom in the share market, which could have been used to offload the equities mentioned.

Rather than uncritically follow the restrictive recommendations of the SIT (which, this columnist has long held, does nothing better than it does its sittings), a Modi government is expected to slash restrictions and ensure a smooth track for investment, both foreign and domestic. For example, it makes no sense to restrict foreign ownership in defence to 49%. India is not a banana republic, and even a 100% owned foreign company would be subject to the control of the authorities in India, the way enterprises are in China or in the US, two other large economies. The cap should be done away with in this as in other sectors, even while ensuring that domestic industries be given the policy matrix needed to grow globally, especially in pharmaceuticals, where the generic industry should be protected from global predators. And rather than hand over the population of India to Google or Facebook, what is needed is to ensure the development of local versions of such products, the way China has. Mark Zuckerberg loves his billions, not India, and this needs to be borne in mind while mulling through his wish list for the Government of India, which needs to do much greater follow up on the Prime Minister’s internet-related initiatives. A good start may be to staff the highest levels of the Department of Telecom, not with generalists, but with those having domain knowledge and an innovative spirit in line with the Prime Minister’s doctrine of Naya Soch. Apart from telecom, other fields where significant investment will follow policy and personnel changes are infrastructure, energy and urban development. However, for this, Prime Minister Modi needs to be given enough respite to concentrate on governance.

Despite the value of the rupee collapsing, exports are plummeting. And while the crescendo of official statements on corruption, greed and graft continue, black money is still following the UPA-era pattern of being sent abroad rather than getting spent on goods and services in India, or being invested domestically. In other words, the money made is generating jobs abroad rather than at home.

In Gujarat, Chief Minister Modi made his effective governance the campaign, relying on the record in office to ensure victory for his party. After nearly two years in office, the time when voters were satisfied with promises is over. What they are looking for is performance, and for this, the Prime Minister needs to be allowed by his party to devote the same attention to matters of governance (rather than “petty politics”) as was the case in Gandhinagar.